UPDATED: The Paycheck Protection Program (PPP) – what it is & how to apply

Our friends at the Wefunder blog have broken down everything you need to know about the Paycheck Protection Program – apply today and, if approved, get a loan as soon as April 3rd!

Application form available here. 

Note: the application deadline is June 30th 2020.

To calculate your PPL loan amount, click here

 

UPDATED INFO:

  • Small businesses and sole proprietors began applying on April 3.
  • Independent contractors and self-employed individuals can apply beginning on April 10. 

 

  • While the program is open until June 30, 2020, the government is advising borrowers to apply as soon as possible given the loan cap on the program.

Payroll can be calculated as an average number over the previous 12 months. 2.5x monthly payroll is granted if you spend it on qualified expenses

Countable payroll expenses: salary (up to $100k for each person), wages, tips, commissions, employee benefits, payment of state and local taxes assessed on compensation of employees, payment for vacation and leave

Not countable payroll expenses: salary beyond $100k for each person, FICA, federal tax withholdings, and Independent Contractors

Your 2.5x monthly payroll “loan” is forgiven if you maintain/restore staffing and it’s used on approved expenses (75% needs to go to payroll). If you end up owing money back interest rate is 1%, no payments for 6 months (can be extended to 1 year), loan is mature at 2 years (this is new).

 

What is it?

$349 billion is being loaned to small businesses to cover their payroll. Most (if not all) of this loan will be forgiven if you do not lay off employees.

In other words, this is free money from the government to cover your payroll.

Do I qualify?
You are eligible if you have under 500 employees or are a “small business concern” (as defined by the SBA).

Each industry has different criteria for what a small business concern is. Having a venture capital investor who can control your startup might be disqualifying, unless the SBA changes the rules for what is considered an “affiliate” in their definition of a small business concern.  You can read more than you ever want to know about affiliation rules on the SBA’s web site here.

What is the maximum loan?

Take your average monthly payroll expense over the last 12 months (excluding the amount in excess of $100k for employees that make more) and multiply it by 2.5. That is the maximum loan you are eligible for.  However, it can’t exceed $10 million.

How do I apply?
Loans are made through the SBA 7(a) program. Over 800 SBA-approved lenders are expected to be able to distribute loans.

You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool here.

That’s an aggressive timeline. We wouldn’t be surprised if there are delays. The SBA distributed $28 billion in 2019, and they are being asked to deploy over $400 billion in April.  Expect growing pains.

Do I need to personally guarantee the loan?
No.

Do I need collateral to get the loan?
No.

How can I use the money?
You can only use the money for payroll, health care, rent/mortgage/utilities, and interest on debt.

How much of the loan is forgiven?
The amount used for payroll (up to $100K for each employee), health insurance, mortgage interest, rent, and utility payments in any 8 week period from February 15th through June 30th is forgiven, as long as you don’t lay anyone off.

The devil is in the details.  If you lay off people, it gets a little more complex (forgiveness is ratio of payroll reduction).  If you cut salaries of those who earn under $100K by more than 25%, less debt will also be forgiven.

If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30.

What is the interest rate and maturity date fo the amount that is not forgiven?
The legislation mandates that the interest rate cannot exceed 4% and the term not over 10 years.  SBA lenders may offer terms within those limits.

When is the application deadline?
June 30th, 2020

 

Still have questions? Visit here.

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